Building a business from scratch can be slow, uncertain, and come with a variety of unknown risks. A common conception of entrepreneurship is building a business from the ground up and taking on the challenge of turning an idea into a successful business. However, buying an existing business offers an alternative path to entrepreneurship that can offer numerous advantages over starting a business from scratch. One of the most significant advantages of buying an existing business is the immediate access to an established customer base and a revenue stream from the outset. Unlike starting a new business where building a customer base can take years, existing businesses have customers that generate consistent income. There are of course transactions where people buy businesses that are not successful or generating income but that is another discussion. Purchasing a business with existing customers and revenue reduces the uncertainty and financial instability often associated with new ventures, allowing the buyer to focus on growing the business rather than merely surviving the early stages. Existing revenue can also make it easier to secure financing to fund the purchase as lenders and investors are more likely to lend capital to a business with a good track record. In addition to a customer base, purchasing an existing business means you will also be obtaining the brand and market presence that comes with it. Branding, like customers, can take years to develop. Building a brand can be time consuming and challenging, but buying
a business that has a positive reputation and trust with customers is extremely beneficial. In a business transaction, unless there is specific intellectual property you can point to, this brand recognition is typically referred to as goodwill and is part of a business valuation. Starting a new business involves considerable trial and error when trying to establish market presence, systems, and identify what is going to make your specific business successful. After spending significant time on all of this, there is no guarantee that it will ultimately be successful. To avoid all of these growing pains, you can find a business that has already gone through this process and is fine tuned. This can reduce the learning curve for a new business owner and allow them to focus on growth. The reduced risk of purchasing an existing business is reflected in the higher success rate of such ventures compared to startups. With a proven track record, established processes, and a loyal customer base, the likelihood of continued success is significantly higher. This makes buying an existing business an attractive option for entrepreneurs. The Role of M&A in Driving Wealth Creation for Black Communities Given the benefits described in the previous section of participating in M&A transactions, they can be used as a tool to create wealth for the Black community. For the Black community, which continues to face systemic barriers to economic advancement, participation in M&A activities presents an opportunity to foster business growth, create generational wealth, and address economic disparities. By leveraging M&A, black entrepreneurs and business owners can accelerate the journey of owning a successful business and contribute to the broader economic empowerment of Black communities. Organic growth of a business can be limited and hindered by limited access to capital and the resources needed to be successful. M&A transactions allow for accelerated growth.
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30 The Acumen
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